LONDON, Dec. 13 (Xinhua) -- Britain's economy shrank during the period of August-October 2025, with two of the three main economic sectors recording contractions. Analysts forecast weak growth momentum in 2026 amid subdued productivity and confidence as the economy is trapped in a low-growth cycle.
The country's real gross domestic product (GDP) edged down 0.1 percent in the August-October period compared with the three months to July, estimates from the Office for National Statistics (ONS) showed Friday.
The 0.1-percent fall in the three months to October was the first three-month fall in real GDP since December 2023, according to the ONS.
Specifically, production output fell by 0.5 percent and construction output dropped by 0.3 percent. The services sector stalled in the three months to October, sustaining the recent trend of slowing growth since March 2025.
"There's little festive cheer for businesses in the latest GDP data, as the economy unexpectedly shrank in both the three-month period and October itself," Stuart Morrison, research manager at the British Chambers of Commerce (BCC), commented.
He also said the data paints a particularly worrying picture for the services sector, which is usually a real strength of the British economy. "Firms are left waiting for an unlikely Christmas miracle on growth," he added.
"The burst of growth at the start of the year is now a distant memory," Julian Jessop, economics fellow at the Institute of Economic Affairs, said, noting that the economy began to falter in the spring when the increases in employers' National Insurance and other business costs in last year's Budget finally kicked in.
There was then a brief recovery as fears of a global trade war faded, but this was followed by an extended period of uncertainty ahead of this year's Budget, he said, adding that although some easing of uncertainty after the latest Budget might still allow another bounce in activity next spring, it is very hard to restore economic confidence once it has been lost.
The outlook for British economic growth will remain subdued in 2026 as this year's Budget is unlikely to kickstart the economy, according to a recent forecast from the BCC. It expected Britain's GDP to expand 1.2 percent next year, lower than the 1.4-percent growth in 2025 and projected business investment to fall from expected growth of 3 percent in 2025 to only 0.9 percent in 2026.
BCC also forecast slower UK trade growth, continued easing of average earnings and the rise in the unemployment rate next year, noting that firms will continue to face ongoing cost pressures, sluggish productivity and low output.
Vicky Pryce, chair of the BCC Economic Advisory Council, said that businesses will be steering through choppy waters once again next year after a Budget that lacked the growth measures so desperately needed.
In its latest Economic Forecast, the Confederation of British Industry (CBI), has upgraded its 2026 GDP growth projection from 1 percent to 1.3 percent, with the upward revision driven largely by a temporary boost to government expenditure following the Budget.
But it warned that solid headline GDP growth masks persistent weakness in private sector demand, and longer-term prospects will remain constrained by weak productivity and future fiscal tightening.
Louise Hellem, chief economist of the CBI, said the British economy is continuing to face significant and persistent headwinds, with fragile demand, domestic and global uncertainty keeping a lid on business investment and cumulative burden of rising employment costs hitting firms' profits and hiring plans.
Joanna Marchong, head of communications and external affairs at the Adam Smith Institute, noted that this year's Budget made an improvement from the one of last year by taking growth as a priority, but "thinking it can be done by more spending, regulation and a flotilla of stealth taxes, fiscal drag and policy tinkering will achieve nothing close to stability, but only more pain for the economy."
If the government is serious about restoring business confidence, it must urgently address some of the biggest barriers to competitiveness -- particularly crippling business energy costs, a costly and overcomplicated business tax regime, and uncertainty around future employment costs, Hellem said. ■
